A Second Bite as Good as the First May 21, 2008 Pershing Square - PowerPoint PPT Presentation

A Second Bite as Good as the First May 21, 2008 Pershing Square Capital Management, L.P.

Disclaimer Pershing Square Capital Management, L.P.'s ("Pershing") contained in this presentation are based on publicly available information. Pershing recognizes that there may be confidential information in the possession of the companies discussed in the presentation (the “Companies”) that could lead the Companies to disagree with Pershing’s conclusions. The analyses provided may include certain statements, estimates and projections prepared with respect to, among other things, the historical and anticipated operating performance of the Companies. Such statements, estimates, and projections reflect various assumptions by Pershing concerning anticipated results that are inherently subject to significant economic, competitive, and other uncertainties and contingencies and have been included solely for illustrative purposes. No representations, express or implied, are made as to the accuracy or completeness of such statements, estimates or projections or with respect to any other materials herein. Actual results may vary materially from the estimates and projected results contained herein. Pershing manages funds that are in the business of trading - buying and selling - public securities. It is possible that there will be developments in the future that cause Pershing to change its position regarding the Companies and possibly increase, reduce, dispose of, or change the form of its investment in the Companies. This presentation should not be considered a recommendation to buy, sell or hold any investment. In addition, this presentation is not a solicitation of proxies. Pershing and its affiliates retain the right to vote on any matters relating to each or any company, including without limitation, for or against any proposed transaction.

McDonald’s: Let’s Go Back in Time… Just a few years ago, investor sentiment regarding McDonald’s was negative � Wall Street analysts were generally bearish on McDonald’s stock citing: Circa: 2002 – 2003 (1) � Weak same-store sales � Losing share to competitors Avg stock price: ~$22 � Poor consumer environment � Concerns regarding management’s ability to turn EV / Fwd EBITDA: around the Company ~8.6x � Restaurant companies were trading at low multiples (1) Time period referenced is 2002 through the first half of 2003. 2

But McDonald’s Was Not a Restaurant Company… McDonald ’ s company-operated restaurants (“McOpCo”) appeared to contribute ~50% of total EBITDA. However, once adjusted for market rent and franchise fees, McOpCo actually constituted ~20% of total EBITDA, with Brand McDonald’s contributing ~80% of total EBITDA. EBITDA Adjusted for EBITDA Market Rent and Franchise Fees As Reported McOpCo McOpCo 22% 48% 55% 52% 78% Brand McDonald's Brand McDonald's ________________________________________________ Note: Based on 2005A Reported financials. McOpCo contribution includes Other Brands. The analysis assumes that approximately 79% of the total G&A is allocated to Brand McDonald’s business and 21% is allocated to McOpCo. Analysis excludes non-recurring expenses and other net operating expenses. . 3

What Happened at McDonald’s McDonald’s 2002-2003 (1) McDonald’s Today Problems: What it Did: � � Weak new products Introduced strong new products � � Ineffective marketing Improved marketing: “I’m Lovin’ it” � � Poorly performing owned stores Slowed US unit growth, refranchised 30% of McOpCo stores � Issues with capital allocation and improved margins � Weak systemwide same-store sales � Improved disclosure between Brand McDonald’s and McOpCo � Increased share repurchases and Market perception: raised the dividend 3.75x “McDonald’s is a poor performing Market perception: restaurant company in need of “McDonald’s is a global brand a turnaround” business with strong momentum and significant cash flows” (1) Time period referenced is 2002 through the first half of 2003. 4

McDonald’s Stock Performance (1) Since 2004, McDonald’s stock price has increased from approximately $23 to $61 because of its initiatives to (1) improve systemwide same-store sales, (2) improve profitability at its Company-operated stores, (3) enhance the financial transparency of its Brand business and (4) increase share repurchases and dividends (1) From 1/1/2004 – Current $65 $61 $60 $55 $50 $45 $40 $35 $30 $25 $20 Jan-04 Nov-04 Sep-05 Aug-06 Jun-07 May-08 ________________________________________________ (1) Note: Dividend adjusted stock price performance. 5 .

McDonald’s Reminds Us Of Another Situation… McDonald’s 2002-2003 Wendy’s Today System Problems: System Problems: � Weak new products / innovation � Weak new products / innovation � Poorly performing owned stores � Poorly performing owned stores � Ineffective marketing � Ineffective marketing � Weak same-store sales � Weak same-store sales � � Leadership turnover Lack of leadership System Strengths: System Strengths: � Strong value proposition � Strong value proposition � Premier global QSR brand � Strong US QSR brand � Great locations � Great locations � Fresh, not frozen, food / fast service Avg. Stock price: $22 Stock price: $28 Avg. EV / Fwd EBITDA: ~8.6x EV / Fwd EBITDA: 8.9x (1) ________________________________________________ (1) Assumes Wendy’s standalone “unfixed” 2008E EBITDA. . 6

Wendy’s International

Wendy’s International � Third largest quick-service hamburger chain in the US � Approximately 6,645 restaurants � Approximately 80% of systemwide restaurants are franchised Recent stock price: $28 � Estimated $9bn in systemwide sales EV: $2.8bn � Leading US restaurant brand Equity Value: $2.45bn � Estimated $313mm of EBITDA in FY’08E Net Debt: $0.3bn Ticker: WEN � Net Debt / ’08E EBITDA of 1.1x Note: All references to market capitalization � Pershing Square Capital Management and enterprise value in this presentation are based on a $28 share price recently purchased 15% of Wendy’s 8

Situation Analysis In June of 2007, Wendy’s announced that it was pursuing a sale of the Company. Since then, amidst the fallout in the credit markets and concerns about the failure of the strategic review process, the stock traded down from $38 to a low of nearly $22. In April, Wendy’s announced an all-stock transaction with Triarc Companies (“Triarc”), owner of Arby’s $42 April 26, 2007 : Wendy’s forms Special Committee to explore $39 “strategic alternatives” $36 April 24, 2008 : Wendy’s signs definitive $33 merger agreement with Triarc in an all-stock deal $30 November 2006 : Wendy’s repurchases June 18, 2007 : 22.4 million shares for Wendy’s announces that it $28 $27 $35.75 in a tender offer is pursuing a sale of the Dec 2007 – March 2008 : company Pershing tenders its Committee decision $24 shares regarding a sale of the company is still unclear $21 Oct-06 Feb-07 Jun-07 Sep-07 Jan-08 May-08 9

Relative Valuation EV / 2008E EBITDA Multiples 12.0x 10.7x 10.6x 10.0x 10.0x 9.3x 8.9x 8.0x 6.0x 4.0x 2.0x 0.0x WEN YUM MCD BKC SONC Standalone “Unfixed” ________________________________________________ 10 Note: Source for comparable restaurant companies multiples is Capital IQ. As of 5/15/08. .

Wendy’s Relative Stock Price Performance Wendy’s stock price is down 16% since January 1, 2007 while comparable Quick Service Restaurants are up 38% From 1/1/2007 – Current 140% 38.1% QSR 130% Peers (1) 120% 110% 100% 90% (16.2%) 80% Wendy’s 70% 60% Jan-07 Apr-07 Jul-07 Oct-07 Feb-08 May-08 ________________________________________________ (1) Market-Cap weighted index consisting of McDonald’s, Yum!, Burger King and Sonic. 11

Valuing Wendy’s Standalone

What is Wendy’s? Brand Wendy’s Company Operated Restaurant Operations Franchise Real Estate � Over 1,400 company � Approximately 6,645 � Owns over $1bn of operated restaurants restaurants where real estate assets Wendy’s receives (approximately 40% ~4% of unit sales of Wendy’s current Enterprise Value) 13

Wendy’s: A Brand Royalty and Real Estate Company Even more so than McDonald’s, Wendy’s is fundamentally a Franchise and Real Estate business (“Brand Wendy’s”). Wendy’s company- operated restaurants (“OpCo”), once adjusted for market rent and franchise fees, are generating virtually no profits 2008E Total EBITDA Adjusted for 2008E Total EBITDA Market Rent and Franchise Fees As Reported Brand OpCo Wendy’s 7% 41% 93% 59% Brand Wendy’s Brand Wendy’s OpCo (Franchise and Real Estate) ’08E EBITDA: $313mm ’08E EBITDA: $313mm ________________________________________________ Note: The analysis assumes that approximately 75% of total Wendy’s G&A is allocated to Brand Wendy’s business and 25% is allocated to OpCo. The analysis assumes that rent is charged to OpCo at a 7.25% cap rate. The analysis excludes non-recurring expenses. . 14